Sebi bars Karvy Stock Broking, its chairman from market for 7 years
08 May 2023
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The Securities and Exchange Board of India (Sebi) has barred Karvy Stock Broking Ltd (KSBL) and its chairman C Parthasarathy from accessing the securities market for seven years. In its final order, issued on Friday, Sebi also slapped KSBL and Parthasarathy with a penalty of Rs13 crore and Rs8 crore, respectively.
Additionally, Sebi has restrained Parthasarathy from holding the post of director or any key managerial position or associating himself in any capacity with any listed public company or Sebi-registered intermediary for 10 years. The market regulator also restrained independent directors of the brokerage firm – Bhagwan Das Narang and Jyothi Prasad – for two years besides imposing fines of Rs5 lakh each.
However, Sebi disposed of the proceeding against independent directors Yugandhar Meka and Ashish Agarwal.
Karvy Realty and Karvy Capital have been directed to transfer Rs1,443 crore to KSBL within a period of three months, failing which the NSE has been directed to take control of the assets of Karvy Realty and Karvy Capital to recover the money.
Sebi, in its order, has observed that KSBL failed to settle the funds and securities of more than 300,000 clients, in line with the process and timelines prescribed by Sebi, causing mental agony of possible financial loss. The order noted that KDBL has been pledging securities of the clients regularly since 2016.
NSE had, as far back as in 2019, warned of KSBL raising funds by pledging clients’ securities and by misusing the power of attorney granted to it by its clients and diverting the funds so raised to other group entities.
Sebi had on 22 November 2019, passed an ex-parte ad-interim order to prevent further misuse of clients’ securities. And, NSE had subsequently revoked KSBL’s membership before expelling it from market. NSE also appointed Ernst and Young to conduct forensic audit into the shortfall of funds and securities noticed during joint inspection conducted by the Sebi, NSE, BSE, NSDL and CDSL.
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